To do business in Germany, it is vital to have a good understanding of its business or work culture. Making the right impression with the right people is the key to success in Germany, and it is important to back this up with the right research on the market and potential business associates.
As a global PEO (Professional Employment Organization) it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about the German work culture, we want to support your global expansion plans. Therefore, we will address all aspects of the work culture in Germany to start your expansion well-informed.
Work Culture in Germany
Germans have the reputation of being modern, liberal, and cultured, and their working practices are formal and professional. Employees in Germany are also often viewed as working fewer hours but being more productive. Communication between peers generally relates to their work, not out-of-office activities.
Nevertheless, there is a growing appreciation of striking a work/life balance through flexi-time and taking opportunities for remote working, but in the office itself etiquette still plays a key role. Here are a few tips and working practices you should be familiar with before starting on your expansion:
- Hierarchy: German business culture has a well-defined and strictly observed hierarchy – with clear responsibilities and distinctions between roles and departments.
Work ethics in Germany include structuring the work force on the basis of qualifications and experience, where higher-qualified and more experienced employees go on the top of the hierarchy and the lesser qualified and newbies go on the bottom of the hierarchy.
- Work Relationships/Friendships: Work relationships are considered very important in Germany, but friendships aren’t developed too quickly.
- Introductions: In Germany, introductions tend to be formal. Using ‘Herr’ or ‘Frau’ is the norm. If speaking German, use the formal version of ‘you’ (Sie), unless invited to use the informal ‘Du’. Shaking hands is also common during introductions.
- Dress Code: Dress is similarly formal, men wearing dark suits, white shirt, with a solid tie; women wearing dark suits, white blouse, or a formal dress. Only remove jacket if your German colleague does so.
- Punctuality: In Germany, appointments and meetings are precisely planned and is expected for set times to be adhered to. Being punctual is a matter of good manners.
- Negotiations: Business communication is generally carried out in formal language, and negotiating a sale or contract is a fair, well-mannered, and well-planned process. Germans are not sold on flashy behavior and prefer the presentation of data for evidence to claims.
- Agreements: The decision-making process is quite lengthy in Germany, due to the hierarchical structure of many of its businesses. Verbal agreements and handshakes bond an agreement. However, most agreements are in writing. It is also expected of business associates to act on their part of the deal, as unreliability is looked down upon.
- Communication: In Germany, locals communicate directly and explicitly, and they do not ‘sugar-coat’ their statements. This can make them appear rude or threatening, even though this is not their intention. They also do not easily recognize or respond to verbal subtleties.
- Meals: Business meals are used to cement relationships, not generally to discuss deals.
Germany Minimum Wage
The German national minimum wage, by law, is €9.50 an hour. Any contract or work agreement for an amount below that may be invalid. However, many industries and sectors set their own minimum wages based on collective agreements within their sectors.
If the minimum wage is not paid, employees can make a claim for the difference between their actual pay and the minimum wage from their employer. Violations of the Minimum Wage Act can trigger fines of up to €500,000.
The government reviews the minimum wage bi-annually. The statutory minimum wage applies to all employees over the age of 18. Under certain conditions, interns may also be entitled to the minimum wage.
Probation in Germany
The employment contract must specify when your employment begins and the length of the probationary period. In Germany, the probationary period usually makes up the first three months of employment, with the maximum probationary period being six months. During this time, the employment relationship can be terminated by either party with two weeks’ notice.
Working Hours in Germany
The average working week in Germany is between 36 and 40 hours over a six-day period, Monday to Saturday. The maximum statutory limit for working hours is eight hours per day and 48 hours per week, averaged over six months. However, under certain circumstances it can be extended to 10 hours.
Most full-time jobs are seven or eight hours a day over five days a week, with an hour or 30 minutes’ rest at lunchtime which can be split into two breaks. A 45-minute rest break must be given if an employee works for more than nine hours, and this can be split into breaks of at least 15 minutes.
At the end of the working day, there must be an uninterrupted rest period of at least 11 hours. In addition, most industries have collective agreements that regulate working hours and holidays. Therefore, some companies may operate a longer working week, but compensate their employees with a higher salary or additional annual holiday leave.
Work on Sundays and public holidays is generally prohibited. There can be exceptions, for example in the service industry. However, work on Sundays must be compensated by corresponding time off within the following two weeks (or eight weeks in the case of work on public holidays).
Overtime in Germany
Overtime pays and surcharges are not regulated by law but are subject to the employment contract, collective bargaining or works council agreements. Overtime must also conform to the maximum working hours (i.e., no more than 60 hours a week, averaging 48 hours over a six-month period).
Overtime is usually compensated with time off in lieu, although some companies only pay for any overtime hours worked. The right to compensation for overtime hours worked will be specified in the employment contract. Some companies maintain that a small amount of overtime is a normal part of the job and will not provide additional remuneration.
Notice period in Germany
Over the decades, Germany has developed a strong social contract with workers. There are many laws and regulations that employers must follow to ensure the wellbeing and fair and equal treatment of employees.
The length of the notice period given by the employer depends on the employee’s length of service, ranging from four weeks for employees with less than two years’ service, to seven months for employees with more than 20 years’ service.
Unless otherwise stated in the employment contract, the extended statutory notice periods are only applicable to terminations by the employer, whereas the employee may terminate the employment with a notice period of four weeks to the 15th or the end of a calendar month.
The minimum notice period given to employees, with length of service:
- Up to 2 years - four weeks prior to either the 15th or the last day of the next month
- 2 to 4 years - one month prior to the last day of the next month
- 5 to 7 years - two months prior to the last day of the next month
- 8 to 9 years - three months prior to the last day of the next month
- 10 to 11 years - four months prior to the last day of the next month
- 12 to 14 years - five months prior to the last day of the next month
- 15 to 19 years - six months prior to the last day of the next month
- 20 years or longer - seven months prior to the last day of the next month
Most employment contracts align the notice periods for employees with the extended periods applicable to employers. Collective agreements may specify longer or shorter notice periods, whereas individual contracts of employment may only specify longer notice periods.
Dismissals must be declared clearly and unambiguously. The decision to end an employment relationship, and when it should end, must therefore be stated with absolute clarity in the dismissal notice. Any notice of termination, whether issued by the employer or by the employee, must be made in writing or the notice of termination is invalid.
Redundancy, Termination / Severance in Germany
Under the Employment Protection Act, an individual employee on permanent contract is entitled to severance pay if the employer indicates that the dismissal is based on operational grounds and offers compensation.
Severance payments of half a month’s wage for each year of service can be filed. The maximum payment stipulated by law equals 12 months’ salary. This rises to 15 months’ salary for employees aged 50 or older, with at least 15 years of continuous service, and to 18 months’ salary for employees aged at least 55 and with at least 20 years of continuous service.
There is also legal entitlement to severance pay for an employee in the case of a collective dismissal if a works council is in place. Under the Works Council Constitution, in case of collective dismissals due to operational grounds, the employer and the works council should negotiate a social plan that includes redundancy compensation. In case the employer does not comply with a social plan, the worker may turn to the labor court for severance pay.
Pension Plans in Germany
Germany operates a three-pillar pension system, comprising of mandatory state pension, occupational pensions, and private pensions. In the past, individuals relied predominantly on pension benefits provided by the statutory pension insurance.
The pension scheme contribution in 2020 is 18.6% of earned income, shared equally between the employer and employee. The employee does not make any contribution on earned income above €82,800 in the former West German states or above €77,400 in the former East German states. Contributions are due to increase to 20% by 2025.
Company or occupational pensions are private schemes offered by employers to allow employees to boost their contributions toward retirement. Private pensions are set up by banks and insurance providers.
Public Holidays in Germany
There are more public holidays in Germany than any other European country. On these days, banks, and most shops close, including supermarkets. However, many restaurants remain open. Public transportation and other services are also available. Many shops and businesses are also closed on Carnival Rose Monday (Cologne and Rhine region), Christmas Eve and New Year’s Eve although these are not official holidays. Common public holidays in Germany include:
- New Year’s Day - January 1
- Good Friday - March/April
- Easter Monday - March/April
- Labor Day - May 1
- Ascension Day - May
- Whit (Pentecost) Monday - May
- Day of German Unity - October 3
- All Saints’ Day - November 1
- Christmas Day - December 25
- Stephen’s Day - December 26
Sick Leave in Germany
If an employee is unable to perform their contractual duties due to physical or mental incapacity or illness, they can take time off work. The employer must be informed immediately, as well as the Human Resources department, in most cases. If absence extends over three consecutive days, the employee must submit a doctor’s note.
German law requires that employees are paid 100 per cent of their salary or wages by their employer during the first six weeks. Under certain circumstances, this six-week period can be enacted more than once a year. If employees are sick during their holiday, some companies will allow this to be counted as sick leave rather than holiday leave.
After six weeks, employees are entitled to statutory/private insurance sickness benefits. The allowance amounts to 70% of normal pay for a maximum period of 78 weeks.
Sickness benefit is funded by health insurance premiums, meaning employees are automatically covered if they contribute to the German statutory insurance system. The insurance covers employees and their families. The general contribution is 14.6 % plus an additional contribution if implemented by the respective insurance institution – on average 1.1 % of the monthly gross pay up to € 4,687.50 (payable half each by employer and employee). All workers with regular annual salaries lower than €62,550 must be enrolled in the compulsory scheme.
To qualify for sickness benefit, the following criteria must be met:
- The employee contributes to a statutory health insurance scheme
- Individuals have a valid residence permit (if applicable) allowing work in Germany
- Being unable to work due to sickness for more than six weeks and/or the employer is no longer paying a salary
- A certificate from a doctor confirming incapacity for work
- Attend a medical examination if requested
With private health insurance, the amount and duration of sickness benefit received beyond the initial six weeks depends on the type of cover chosen when taking out the policy.
Vacation / Holiday in Germany
Full-time employees in Germany are entitled to a statutory minimum of 20 days’ annual paid holiday, based on a five-day working week, or 24 days based on a six-day working week. Part-time employees’ holiday leave is calculated pro rata, based on weekly working hours. Employers regularly grant more than the minimum vacation and between 25 and 30 days per year is common.
Full holiday entitlement starts after six months’ employment. If employment ends before six months or within the first half of a calendar year, the employee is only entitled to one twelfth of annual vacation entitlement for each month employed. Termination after the first six months and within the second half of the calendar year, entitles the employee to the full annual vacation.
There is no entitlement when an employee has already taken vacation in a previous job during the same calendar year. The previous employer must certify the vacation already taken.
During vacation, employees are entitled to full remuneration. Frequently, the employer also grants a special holiday bonus.
In general, employees must take their annual holidays/vacation during the calendar year – otherwise, it is forfeited. However, unused holiday can be carried forward until March 31 of the next calendar year if the employee was unable to take the holiday due to operational or personal reasons.
If any holiday entitlement remains at the end of the employment, employees can claim financial compensation for the days not taken or take the days during the notice period.
Maternity/Paternity Leave in Germany
Female employees are entitled to paid maternity leave, six weeks before and eight weeks after giving birth. Maternity leave after the birth is 12 weeks in case of multiple births, premature births, and disabled children. Payments to the employee during this period are made partly by the statutory health insurance provider and partly by the employer.
The German social security system provides for maternity benefits (Mutterschaftsgeld) to be paid to most women during statutory maternity leave.
The maternity allowance amount is determined by the salary of the last 13 weeks or 3 calendar months before the beginning of maternity leave to a maximum of €13 per day plus 65% of their most recent pay. The employer pays the difference between the maternity allowance and previous salary, if required.
Employees not covered by state health insurance (e.g., privately insured or with family insurance under the state health insurance system) receive one-off maternity benefits up to a maximum of €210 from the Federal Office for Social Security.
Following maternity leave, both parents of a new-born child are entitled to parental leave until the child has reached the age of three. Any mother or father who are in an employment relationship may apply for parental leave but need to inform both the employer and health insurance fund seven weeks in advance of the intended leave date(s).
An additional option, Parental Allowance Plus, is also available for parents of children born on or after July 1, 2015. This gives employees the right to receive the parental allowance from the government for a period of up to 24 months or, if both parents decide to take parental leave, parental allowance can be shared between the parents for a period of up to 28 months.
Bonus in Germany
It is common in Germany for employees to be rewarded through contractual or discretionary bonus payments:
- Contractual bonus payments – Employers must carefully set up contractual bonuses to be reasonable and achievable, as changes to the bonus plan are very restricted. If the plan is not reasonable or achievable, the employee may claim damages. This often results in receiving the on-target bonus payment.
- Discretionary bonus payments – This bonus type is generally subject to the rules on discrimination and the equal treatment principle. These are decided at the end of the fiscal year – if one will be paid at all, or the amount. Common discretionary bonus payments include holiday bonuses, anniversary bonuses, or a profit-sharing bonus (for high-level employees).
Car allowances in Germany
Regarding transportation benefits, employers pay an allowance to their employees for public transportation or provide a job ticket (a bus or train pass). In certain instances, this ticket is free of tax.
Employers also usually provide managers, sales representatives, and technical support members with a car allowance that is taxable to the employee as a fringe benefit. Car allowances typically range from EUR 400 – EUR 1,000 per month - it is part of the employee’s salary and is subject to taxation and social security contributions.
Employees may also negotiate for a company car, which can be used for personal use. However, the current trend is to offer a car allowance, rather than a company vehicle.
Don't suffer culture shock, call us!
To expand into Germany fruitfully, an understanding of the local business culture is vital for your business’ success. With Bradford Jacob’s expertise and knowledge of employment through our Professional Employment Organization (PEO), as well as our experience with German customs, law, compliance, and tax regulations, we can assure the recruitment of the right people to make your expansion goals a reality. Contact us to find out more!